S-1/A: Permex Petroleum Eyes Nasdaq Listing with Proposed Unit Offering

Permex Petroleum Corporation files an amendment to its Form S-1 registration statement for a proposed public offering of common and pre-funded units to facilitate a Nasdaq Capital Market listing.

Summary

• Permex Petroleum Corporation is planning a public offering consisting of common units (each with one common share and one warrant) and pre-funded units (each with a pre-funded warrant and one warrant).
• The company has applied to list its Common Shares and Warrants on The Nasdaq Capital Market under the trading symbols OILS and OILSW, respectively.
• The offering price is estimated to be between $ and $ per Common Unit, with an assumed initial public offering price of $ per Common Unit.
• The warrants will have an exercise price equal to 125% of the public offering price of one Common Unit and expire five years from the issuance date.
• The company intends to use the net proceeds from this offering for budgeted capital expenditures, continuing operating expenses and working capital.
• MKM Engineering estimates the net present value of Permex's proved plus probable reserves at $228.856 million as of September 30, 2024.
• The company owns and operates 97 oil and gas wells across more than 11,700 net acres including 66 shut-in opportunities, 17 saltwater disposal wells and two water supply wells allowing for waterflood secondary recovery.
• The company holds royalty interests in 73 wells and five permitted wells across 3,800 acres within the Permian Basin.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While the company is pursuing a Nasdaq listing and has valuable oil and gas reserves, it also faces financial challenges and operational risks.

Positives

• The company is actively working to list on the Nasdaq Capital Market, which could increase visibility and liquidity.
• The company has a development plan to drill its proved undeveloped reserves within the next five years.
• The company has a workover program aimed at resuming production, repairing infrastructure, and evaluating additional production zones.

Negatives

• The company has a limited operating history and has incurred losses.
• The company's independent registered public accounting firm has expressed substantial doubt about its ability to continue as a going concern.
• The company's operations were shut-in for nearly eight months in 2024 due to financial constraints.
• There is currently a limited U.S. public market for the company's Common Shares.

Risks

• The company's financial situation creates doubt about its ability to continue as a going concern.
• Oil and gas prices are volatile, and declines in prices may adversely affect the company's financial position.
• The actual quantities and present value of the company's proved oil, gas, and NGL reserves may be less than estimated.
• The company's operations are concentrated in the Permian and Delaware Basins, making it vulnerable to regional risks.
• The company may be unable to acquire adequate supplies of water for its future drilling and operations.

Future Outlook

The company expects to restart its drilling and development program in the first quarter of 2025, subject to receipt of additional funding, and anticipates spending approximately $6 million in capital expenditures towards developing the company's proved undeveloped reserves during the 2025 fiscal year, subject to the company acquiring the necessary financing.

Industry Context

This announcement comes amid increasing investor scrutiny of ESG practices in the oil and gas industry, with some investors divesting from fossil fuel companies. The company's ability to secure financing and maintain its Nasdaq listing may depend on its ability to adapt to these changing expectations.

Comparison to Industry Standards

• It is difficult to compare Permex Petroleum's results to industry standards without more detailed financial metrics and operational data.
• Comparable companies in the Permian Basin include publicly traded companies such as Diamondback Energy (FANG), Pioneer Natural Resources (PXD), and Devon Energy (DVN).
• These companies typically have larger market capitalizations, more diversified asset portfolios, and greater access to capital markets.

Management Changes

Legal Proceedings

• Atlas Tubular, LLC filed a suit against the Company on October 10, 2023, seeking damages of at least $172,981 for unpaid invoices.
• Foundation Energy Services, LLC filed a suit against the Company on September 7, 2023, seeking damages of at least $66,074 for unpaid invoices.
• Premier Energy Services, LLC filed a suit against the Company on August 7, 2023, seeking damages of at least $104,205 for unpaid invoices.
• BJ Pipe & Supply LLC filed a suit against the Company on September 11, 2024, seeking damages of at least $75,951 for unpaid invoices.
• Hudson Pumping Inc. filed a suit against the Company on December 2, 2024, seeking damages of at least $60,050 for unpaid invoices.
• Cudd Energy Services, Inc. filed a suit against the Company and Mehran Ehsan on July 17, 2024, seeking damages of at least $130,224 for unpaid invoices.
• R&B Oilfield Services, LLC filed a suit against the Company on November 6, 2024, seeking damages of at least $36,020 for unpaid invoices.
• Q2 Artificial Lift Services (SOA) Inc. filed a suit against the Company on February 5, 2024, seeking damages of at least $125,102 for unpaid invoices.

Related Party Transactions

• The Company entered into a Separation Agreement with Mehran Ehsan, the Companys former Chief Executive Officer, until April 29, 2024 and Vice President of Business Development, until August 30, 2024.
• The Separation Agreement provides for: (i) a lump sum payment of $100,000 payable upon the Companys receipt of capital investment of no less than $1,000,000 or by October 31, 2024, whichever occurs first; (ii) six equal monthly payments of $7,500 starting October 1, 2024; and (iii) the transfer of ownership of a Company vehicle with a fair value of $35,155.

Stakeholder Impact

• Shareholders may experience dilution as a result of the offering and the potential exercise of warrants.
• Employees may be affected by the company's financial performance and its ability to continue operations.
• Customers may be affected by the company's ability to maintain production and supply oil and gas.
• Suppliers and creditors may be affected by the company's ability to pay its obligations.

Next Steps

• The company needs to satisfy The Nasdaq Capital Markets initial listing criteria.
• The company needs to secure additional funding to restart its drilling and development program.
• The company needs to file a new Form 211 with, and cleared by FINRA, to be eligible for proprietary broker-dealer quotations on the OTC Pink Sheets.

Key Dates